News Roundup Friday 20th September 2019

NEWS ROUNDUP

TAX NEWS

Think-tank suggests new taxes for Scotland

A new report from the Institute for Public Policy Research (IPPR) Scotland think-tank suggests Scotland could raise more than £800m in extra taxes. The analysis says a new local inheritance tax of 10% on estates worth more than £36,000 would provide up to £200m a year, while a payroll tax on businesses whose staff receive low wages would raise more than £600m. The report also suggests a local carbon tax could be levied on firms which import and deliver environmentally unfriendly fuels. IPPR Scotland director Russell Gunson said: “New taxes could see us put our money where our mouth is on the huge priorities facing Scotland. Our politicians should be far more ambitious on tax, thinking bigger to build a stronger, more progressive tax system that better narrows wealth inequalities, tackles environmental breakdown and delivers a fairer economy.” An editorial in the Scotsman considers the IPPR Scotland report, saying that “time and again, past experiences have shown that the best way to raise revenue is through economic growth, not higher taxes.” It adds that with the Scottish economy contracting by 0.3% in Q2, “this is precisely the wrong time to be even thinking about increasing the tax burden.”

The Scotsman, Page: 4, 28

INDUSTRY NEWS

Sports Direct notifies BEIS over auditor hunt

Sports Direct has notified the Business, Energy and Industrial Strategy (BEIS) department that it is tendering for a new auditor. Grant Thornton declined to be reappointed at the retailer’s annual meeting last week, leaving Sports Direct without an auditor. This had prompted reports that it could ask the government to appoint one due to rules within the Companies Act. The Act says an auditor must be appointed by the end of the meeting where accounts are detailed, with the firm in question given a week to declare whether the Business Secretary should step in. Sports Direct said it is “currently in a tender process for a new auditor,” adding: “Any formal procedures, particularly in relation to the Companies Act, are being adhered to.” City AM says the Big Four are reluctant to replace Grant Thornton, citing either conflicts or reputational damage.

City AM, Page: 7

LEGAL NEWS

BBC presenters ‘forced’ into contracts face back tax bill

BBC news presenters Joanna Gosling, David Eades and Tim Willcox have been told to pay hundreds of thousands in back taxes, despite the High Court finding that the broadcaster had used a “unique position” to force the presenters into contracting through personal service companies. The judgement, which followed an HMRC probe as part of a crackdown on the use of personal service companies, said the presenters had breached IR35 legislation which says individuals who are employees in all but name should be liable for more tax. The Revenue pursued the trio for £920,000 and two-thirds of the bill is understood to have been settled already. A BBC spokesman said it wants to help presenters “resolve any historic tax issues they face because of the way their employment status is now being assessed”, adding that it is reviewing the judgment.

The Daily Telegraph, Page: 5

Apple rejects ‘phantom’ firm claim in tax case

Apple’s ongoing appeal against the European Commission’s ruling that it underpaid taxes to the Irish government between 2004 and 2014 by €13bn has seen the tech firm reject claims that its operations in the country involved “phantom” companies that existed “only on paper” to secure beneficial tax deals.

The Times, Page: 40

CORPORATE NEWS

Metro warns over accounts scandal fallout

Metro Bank says it could face a “significant” bill after the Financial Conduct Authority and Prudential Regulation Authority widened their investigations into a £900m accounting scandal at the challenger bank. A bond prospectus from Metro warned of the risks associated with possible action from regulators, saying the probes may result in “criminal and/or civil liability for the bank” or suspension of its regulatory permissions. The regulators are looking at reporting standards, systems, controls and governance over the accounting scandal which saw loans given incorrect risk weightings.

The Times, Page: 42

Pendragon posts loss

Car dealership Pendragon saw a pre-tax loss of £32m for the first six months of 2019, compared to profit of £28m in H1 2018, warning that Brexit uncertainty is hitting consumer confidence. A report on Pendragon’s accounts by KPMG notes: “Brexit is one of the most significant economic events for the UK …. its effects are subject to unprecedented levels of uncertainty of outcomes.” Considering the automotive sector, Julie Palmer of Begbies Traynor said many firms face disruption but those who get their business model right can be optimistic.

The Guardian, Page: 41 The Daily Telegraph, Business, Page: 3 Financial Times, Page: 20 Daily Express, Page: 49 The Sun, Page: 47

Accounting scandal hits Yu Group

Business utility supplier Yu Group’s loss before tax more than tripled in the first six months of the year, from £895,000 to £3.25m, despite revenues rocketing up 70% to £56.5m. Though the probe was later dropped, the Financial Conduct Authority last year opened an investigation into an accounting error at Yu Group which cost the firm £10m.

City AM

Architects in PE deal

Architect practice Corstorphine and Wright has completed a deal with private equity firm Beechbrook Capital. Corporate tax advice for the deal was provided by Smith Cooper and Haines Watts, whilst Mazars provided financial due diligence.

Yorkshire Post, Business, Page: 5

PROPERTY NEWS

Price growth slows in July

Annual UK house price growth in July slowed to its worst rate since September 2012, according to data from the Office for National Statistics. UK house prices grew just 0.7% in the year to July, taking the average to £232,710. Almost half of all UK regions suffered a decline, with the North East seeing the sharpest fall at 2.9%. PwC economist Jamie Durham commented: “Among other factors, the capital and surrounding areas are particularly affected by Brexit uncertainty, and price growth is likely to remain weak or negative until this uncertainty subsides.” Separately, the Royal Institution of Chartered Surveyors reported that new buyer enquiries improved slightly in July, but not enough to boost demand.

The Times, Page: 45 The Daily Telegraph City AM

ECONOMY NEWS

Inflation slows to lowest in three years

UK inflation fell to its lowest point in three years in August, the Office for National Statistics has said, after prices rose by an annualised rate of 1.7% – well below the Bank of England’s 2% target. “Games, in particular computer games, accounted for 0.15 percentage points of the fall,” said Andrew Wishart, UK economist at Capital Economics. Cheaper clothes, toys and petrol also helped to pull inflation down to its weakest annual pace since December 2016. Jing Teow, an economist at PwC, said that the combination of cooling prices and rising wages “delivers a substantial boost to UK households’ spending power that will help to support the economy”. Ian Stewart, chief economist at Deloitte, offered: “Sharply lower inflation is great news for the UK economy. Along with soaring earnings, low inflation boosts consumer spending power just when the economy needs it.” Yael Selfin, chief economist at KPMG, commented: “The falling inflation rate could be an early signal of a cooling economy, in line with what we have seen in the US and the euro area.”

The Times, Page: 45 The Independent, Page: 51 The Guardian, Page: 41 The Daily Telegraph, Page: 3 Financial Times The I, Page: 35 Daily Mirror, Page: 51 City AM

OTHER NEWS

ACCA chief offers Chancellor advice

Helen Brand, chief executive of ACCA, says it is important that Chancellor Sajid Javid “moves pre-emptively to avoid the need for future austerity measures.” Writing in City AM she says Mr Javid should use his newfound fiscal flexibility to do three things: rebalance the tax burden to tackle climate change; ensure infrastructure investment is both targeted and managed; and modernise support for small businesses, saying SMEs should be allowed to use R&D funds to invest in digitising business processes and cloud technologies.

City AM, Page: 17

Power demand threatens emissions targets

Demand for energy pushed up Britain’s consumption of fossil fuels last year, meaning the UK is at risk of missing its emissions targets. PwC, which publishes an index tracking global progress towards a low carbon economy, said Britain might miss its carbon-reduction targets from 2022 onwards, noting that growth of energy-intensive industries had pushed up consumption of fossil fuels.

The Times, Page: 12

Contact Paul Southward. tax@ksk.co.uk

Paul Southward